A Family Mission Statement Can Avoid Confusion

OCEAN CITY – Everyone in your family knows the values you share — right? Not always, and many families are finding a remedy in family mission statements. No longer emblazoned in Latin below a coat of arms, the family mission statement can impart the values, integrity and ethics that help define the family. It’s the kind of declaration rarely found in a traditional financial and estate plan.

“Everyone has some sense of purpose and sense of what values to live by,” says Dr. Stephen R. Covey, best-selling author of such family and personal guides as The Seven Habits of Highly Effective People and How to Develop a Family Mission Statement. “The problem is that they haven’t been shared and communicated.”

“I see this in a number of families I’ve worked with,” comments Karen P. Klein, a Director with the Merrill Lynch Private Banking and Investment Group. “In one family, the patriarch had never articulated what the family’s wealth meant to him — or what he wanted it to mean to his children and grandchildren.”

The client eventually crafted a mission statement that could serve as a guide for his heirs. Says Klein, “Everyone learned they had common core values of faith, family unity, financial understanding — even football!”

In fact, family mission statements can be as personal as the families they reflect. And they can include fun family traditions or allegiances, even if it’s just a college alma mater. Still, as individual in tone and content as they may be, they should capture the true core values and goals of the family to be successful and long-lasting.

A family mission statement can help quantify a family’s intangible assets, giving guidance to future generations and providing context for the executor or trustee responsible for managing the distribution of the estate. More important, the process of drafting a statement helps focus a family’s day-to-day decision-making and provides a framework for passing values — and transferring wealth — to future generations.

Covey recommends keeping the statement as simple as possible so that it can be easily memorized and applied to a variety of situations. Keeping it simple is particularly important when passing down a family business, Covey says, because attempts to micromanage economic and emotional issues into future generations can be counterproductive and lead to family discord. More useful for all concerned is a broad mission statement delineating important family values and ideas, to which individual family members can refer when making financial decisions for themselves or on the family’s behalf. Klein points out that for the patriarch mentioned above, it was a priority to make sure each family member understood the family business and that the business would continue with the family’s direct involvement.

The most effective mission statements are those developed with input from the entire family. Of course, you need to direct the process of creating the family mission statement, so before you sit down with your children, think long and hard about the values that you want to pass on and the character that you want to shape.

“One way of having this conversation is to arrange a family meeting, which your financial advisor can help facilitate,” says Klein. “Use the meeting to ask questions about your family’s vision for the future and discuss how you’d like to harness your family’s intellectual, human, social and financial capital.”

To encourage active participation, frame the first meeting as a brainstorming session, writing down every suggestion. Then use future meetings to pare the list down to four or five key points that everyone can agree on. Craft the mission statement so that the wording is flexible enough to encompass broad goals, but not so expansive that it loses its meaning. Give everyone a copy of the final draft and refer to it often, especially when meeting with your financial advisor and legal professionals, to ensure that investment and estate planning decisions reflect the family’s overall mission.

Once written, family mission statements can prove useful in a broad range of situations. “Some financial decisions, such as philanthropic giving, very directly reflect the core values of the family,” says Klein.

The financial advisor may also find them useful as guides in helping family members establish ways to support shared values. “One Merrill Lynch client who had borrowed money from an uncle to attend college later created an educational fund for his own nieces and nephews. His family mission statement was built on the understanding that every generation would, in turn, replenish the fund as their dreams were realized. Thus, the shared value of continued education crossed several generations.”

As your family grows and changes, the articulation of its goals and how they are achieved may also shift. Revisiting and updating your mission statement might become an annual event. But there will be constant value in having the family’s mission discussed, agreed upon and communicated.

(A Merrill Lynch Senior Financial Advisor. She can be reached at 410-213-8520.)

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